The financial planning industry should take some comfort from the fact that a survey conducted by the NSW Government has revealed that when it comes to reverse mortgages, a substantial proportion of the population will actually go to the trouble of seeking financial advice.
Less comforting is the survey’s finding that of the 92 per cent of respondents who indicated they would be seeking advice before committing to a reverse mortgage, 56 per cent said they would do so by contacting a financial planner, while 47 per cent said they would research the issue online and 43 per cent said they would contact their bank or credit union.
While reverse mortgages have become a decidedly mainstream product in the Australian financial services industry, it is arguable their complexity demands that they be explained to consumers, particularly the elderly, by people who genuinely know what they are talking about.
For her part, the NSW Minister for Fair Trading, Linda Burney, said she found it disturbing that fewer than 30 per cent of respondents would contact a government agency for advice because taking out a reverse mortgage could affect pensions and other entitlements.
The Financial Planning Association and, indeed, the Senior Australians Equity Release Association of Lenders, has gone to some trouble to ensure consumers receive appropriate levels of advice with respect to reverse mortgages, but the NSW Government survey confirms that there are plenty of people still falling through the cracks.
Looked at objectively, there is good reason for the financial services industry to be highly proactive about ensuring consumers are appropriately informed about the benefits and pitfalls of reverse mortgages, not the least of which is the guarantee of highly adverse publicity if such arrangements turn sour.
And there is plenty of evidence that some people have already been inappropriately sold into reverse mortgages and that it is only a matter of time before the media begins relating tales of pensioners, who entered into reverse mortgage arrangements far too early, having ‘lost’ their homes and run out of funds.
As any politician will tell you, home ownership is regarded as almost a sacred right in Australia. It therefore follows that any element of the reverse mortgage story that is perceived to unreasonably undermine the sacred right of home ownership will bring enormous contempt upon the broader financial services industry.
— Mike Taylor
